Fairfax forecasts big fall in second-half earnings

Fairfax chief Greg Hywood said the company’s restructure had created $60 million in savings so far.
Photo: Arsineh Houspian

by
Ben Holgate

Fairfax Media
chief executive
Greg Hywood
has promised “a lean and innovative media company" displaying “relentless change", as it embarks on a second wave of restructuring to eliminate duplication and inefficient businesses and deliver cost savings beyond the $311 million already identified.

Fairfax, which publishes The Australian Financial Review, is also developing new revenue streams within its publishing units that leverage the core business of journalism.

Mr Hywood said there was no debate about what was structural and cyclical for publishers.“This is fundamentally a structural change in the business," he told an investor briefing in Sydney on Thursday. “Print display revenues are moving out . . . into other areas, ­including search," he added.

“You absolutely assume the worse case and manage your business."

Tough trading conditions

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Earnings before interest, tax, depreciation and amortisation (EBITDA) for the second half of 2012-13 are expected to be between $129 million and $135 million. This implies an 18 to 21 per cent decline on a like-for-like basis (or up to 39 per cent on reported figures).

Total revenue fell 9 to 10 per cent in the current half, up to the third week in May.

Metropolitan and regional publishing continue to be the weakest areas, with revenue from each down 11 per cent over the period. New Zealand media has improved, with revenue down only 4 per cent. The stand-out performers are
Domain Digital
(up 16 per cent) and radio (up 10 per cent).

Generating cost savings

Mr Hywood said the company’s organisational restructure, announced in April, had created an extra $60 million in cost savings, to be delivered by September.

Annualised cost savings, including the Fairfax of the Future program, are expected to reach $311 million by June 2015 (up from $251 million).

A product review of all businesses, to determine what is profitable and of long-term strategic benefit , would generate additional cost savings, he said.

“There are areas of revenue growth we see as very strong," he said, nominating data, SME services and events in particular, which will leverage ­audiences created by the mastheads.

He reaffirmed Fairfax’s intention to continue publishing printed newspapers as long as they were profitable.

Fairfax revealed its Domain real estate business, now a separate division, generated $141 million in revenue and $45 million in EBITDA in 2011-12.

In the first half of 2012-13, Domain’s digital revenues increased 14 per cent and digital EBITDA 25 per cent.

“While print will remain important for several years, it is digital that will drive growth," said Mr Hywood. An executive search firm has been appointed to look for a Domain CEO.

Brett Clegg
, director of business media, said newsroom and commercial staff had fallen by one-third over the past 18 months in business media.

The Financial Review would continue to roll out more products, such as the TV show with the
Nine Network
and an android app next month, he said. Commercial real estate was now “one of the key priorities".

Fairfax shares slipped 1.7 per cent on Thursday to close at 59¢.
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